EXHIBIT 99.4
1998 Third Quarter Report
Limited Partner Quarterly Update
Presented for your review is the 1998 Third Quarter Report for the Potomac
Hotel Limited Partnership (the "Partnership"). A discussion of the Partnership's
performance and hotel operations is included in the attached Form 10-Q, Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations. You are encouraged to review this report in its entirety. If you
have any further questions regarding your investment, please contact Host
Marriott Partnership Investor Relations at (301) 380-2070.
HOST MARRIOTT CORPORATION'S CONVERSION TO A REAL ESTATE INVESTMENT TRUST
As publicly announced in April 1998, Host Marriott Corporation ("Host
Marriott"), the General Partner of the Partnership, has adopted a plan to
restructure its business operations so that it will qualify as a real estate
investment trust ("REIT") for federal income tax purposes. As part of the REIT
conversion, Host Marriott proposes to merge into HMC Merger Corporation (to be
renamed "Host Marriott Corporation"), a Maryland corporation ("Host REIT"), and
thereafter continue and expand its full-service hotel ownership business. Host
REIT will operate through Host Marriott, L.P., a Delaware limited partnership
(the "Operating Partnership"), of which Host REIT will be the sole general
partner. This is commonly called an "UPREIT" structure and it is used to
facilitate tax-deferred acquisitions of properties.
In previous correspondence, you were notified that you would be asked to
vote on a proposed transaction involving the Merger of this Partnership with the
Operating Partnership. The Prospectus/Consent Solicitation Statement and the
Partnership's Supplement which contain detailed information relating to this
proposal were mailed to all Limited Partners of record as of September 18, 1998.
This is the date set by the General Partner as the record date for determining
Limited Partners entitled to vote on the Merger and the related amendments to
the partnership agreement. The Prospectus/Consent Solicitation Statement and the
Partnership's Supplement should be reviewed as you make your decision to vote.
You also received, among other things, a list of Questions and Answers and
telephone numbers for assistance. We strongly encourage Limited Partners to
consult with their own financial and tax advisors when making their decision on
how to vote and which option to choose.
It is important that your Partnership Units be voted, regardless of the
number of Partnership Units you hold. The solicitation period ends at 5:00 p.m.,
Eastern time, on December 12, 1998, unless extended. If you have not yet
received the Prospectus/Consent Solicitation Statement or if you or your
advisors have any questions regarding the Merger, please contact the Information
Agent at 1-800-733-8481 extension 445.
ESTIMATED 1998 TAX INFORMATION
If the Partnership votes to approve the Merger and the Merger is
consummated, the taxable income is estimated to be $6,400 per limited partner
unit for the year ending December 31, 1998. If the Partnership does not approve
the Merger, the taxable income is estimated to be $5,300 per limited partner
unit for 1998.
The 1998 tax information, used for preparing your Federal and state income
tax returns, will be mailed no later than March 15, 1999. To ensure
confidentiality, we regret that we are unable to furnish your tax information
over the telephone. Unless otherwise instructed, we will mail your tax
information to your address as it appears on this report. Therefore, to avoid
delays in delivery of this important information, please notify the Partnership
in writing of any address changes by January 31, 1999.
AMOUNTS PAID TO THE GENERAL PARTNER AND MARRIOTT INTERNATIONAL, INC. AND
AFFILIATES
The chart below summarizes amounts paid (in thousands) to the General
Partner and Marriott International, Inc. and affiliates for the thirty-six weeks
ended September 11, 1998 (unaudited):
General Partner and Affiliates
Interest and principal paid on Bank Guaranty loan..................$ 2,212
Interest and principal paid on Raleigh acquisition loan............ 2,179
Interest and principal paid on FF&E loans.......................... 1,749
Interest and principal paid on Tampa acquisition loan.............. 1,713
Administrative expenses reimbursed................................. 177
$ 8,030
Marriott International, Inc. and Affiliates:
Chain Services and Marriott Rewards Program costs reimbursed.......$ 5,423
Base management fees paid.......................................... 2,418
Deferred base management fees paid................................. 1,545
Incentive management fees paid..................................... 679
Interest and principal paid on FF&E loan........................... 58
$ 10,123